Peter Mocco v. Chicago Title Insurance Co

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________
No. 13-2815
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PETER M. MOCCO; LORRAINE MOCCO;
FIRST CONNECTICUT HOLDING GROUP LLC IV,
Appellants
v.
AEGIS FRUMENTO; CHICAGO TITLE INSURANCE COMPANY
_______________
On Appeal from the United States District Court
for the District of New Jersey
(D.C. No. 2-12-cv-01458)
District Judge: Honorable Dennis M. Cavanaugh
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Argued on April 9, 2014
Before: AMBRO, JORDAN and ROTH, Circuit Judges.
(Filed: April 24, 2014)
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John B. Nance, Esq.
James A. Scarpone, Esq. [ARGUED]
Scarpone & Vargo
50 Park Place
Suite 1003
Newark, NJ 07102
Bruce D. Vargo, Esq.
Robertson, Freilich, Bruno & Cohen
One Riverfront Plaza
9th Floor
Newark, NJ 07102
Counsel for Appellants
James J. DiGiulio, Esq.
Joseph P. LaSala, Esq. [ARGUED]
William F. O’Connor, Jr., Esq.
McElroy, Deutsch, Mulvaney & Carpenter
1300 Mount Kemble Avenue
P.O. Box 2075
Morristown, NJ 07962
Counsel for Appellee Aegis Frumento
Michael R. O’Donnell, Esq. [ARGUED]
Riker, Danzig, Scherer, Hyland & Perretti
One Speedwell Avenue
Headquarters Plaza
Morristown, NJ 07962
Counsel for Appellee Chicago Title Insurance Co.
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OPINION
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JORDAN, Circuit Judge.
Husband and wife Peter and Lorraine Mocco, along with First Connecticut
Holding Group LLC, IV (“FCHG IV”), appeal an order of the United States District
Court for the District of New Jersey that dismissed their claims based on New Jersey’s
Entire Controversy Doctrine (the “ECD”), which generally embodies principles of res
judicata and issue preclusion and requires that, when a legal action is filed, all aspects of
the controversy be presented in that action. 1 Because the District Court’s application of
the ECD reflects a misunderstanding of the current state of that doctrine, we will vacate
and remand.
1
The Moccos and FCHG IV also appeal the District Court’s denial of their motion
for reconsideration under Rule 59 of the Federal Rules of Civil Procedure.
2
I. Background
This case stems from a protracted dispute concerning the ownership of certain real
estate assets. According to the Moccos and FCHG IV, lawyer Aegis Frumento and
Chicago Title Insurance Company (“Chicago Title”) engaged in misconduct by assisting
in the transfer of title to those assets from FCHG IV to third parties. The present lawsuit
is just one front in a war dating back to 1998 between the Moccos and their former
business associate, James Licata, over the ownership of those and other assets. Several
other lawsuits (the “Consolidated Cases”) involving the Moccos and Licata were earlier
filed and consolidated in the Superior Court of New Jersey.
In June 2011, the Moccos filed a motion for leave to amend their claims in the
Consolidated Cases to add Frumento and Chicago Title as defendants. That attempt was
the first time that the Moccos sought to add Frumento as a defendant, although they
previously had twice added and twice dismissed Chicago Title as part of a quiet-title
claim. At an in-person hearing on the motion to amend, the state court denied the motion
primarily on the basis of delay, reasoning that, “at the very least, [the Moccos] had a
year” to obtain “the basic information that would give rise to at least [their] theory of
liability” and that “bring[ing] in new parties and apply[ing] new theories on litigation that
started back in 1998” would further postpone an already-delayed trial. (J.A. at 703.)
In January 2012, the Moccos and FCHG IV filed the present suit against Frumento
and Chicago Title in the Superior Court of New Jersey, asserting civil-conspiracy and
aiding-and-abetting claims. The defendants removed the action to federal court in March
3
2012.2 Frumento and Chicago Title filed separate motions to dismiss for failure to state a
claim, with Frumento arguing that the ECD bars this action and Chicago Title noting its
joinder in that argument. 3 The District Court granted the motions to dismiss on ECD
grounds.
Following the denial of a Rule 59 motion to alter or amend the court’s judgment,
this timely appeal was filed.
II. Discussion4
The ECD comes in two varieties: “claims-joinder” ECD and “party-joinder” ECD.
Paramount Aviation Corp. v. Agusta, 178 F.3d 132, 135 n.1 (3d Cir. 1999). The former
requires all related claims between the same parties to be adjudicated together; the latter
is, in essence, an ongoing notice requirement mandating that “a party to any litigation ...
reveal the existence of any non-party who should be joined or who might have ‘potential
liability to any party on the basis of the same transactional facts.’” Kent Motor Cars, Inc.
2
At oral argument, the Moccos and FCHG IV for the first time asserted that
Frumento and Chicago Title were untimely in removing the case to the District Court. In
a follow-up letter dated April 11, 2014, however, they expressly waived any such
argument. We therefore will not address it.
3
The Moccos and FCHG IV imply in the fact section of their opening brief that
Chicago Title waived its ECD defense because it failed to raise the defense in its motion
to dismiss. Chicago Title joined Frumento’s ECD argument by way of a footnote in its
reply brief. But the Moccos and FCGH IV themselves waived the “waiver” argument by
failing to include it in the argument section of their opening brief. See Ethypharm S.A.
France v. Abbott Labs., 707 F.3d 223, 231 n.13 (3d Cir. 2013) (“We have consistently
held that ‘[a]n issue is waived unless a party raises it in its opening brief, and … a
passing reference to an issue ... will not suffice to bring t hat issue before this court.’”
(first and third alterations in original)).
4
The District Court had jurisdiction under 28 U.S.C. § 1332. We have jurisdiction
pursuant to 28 U.S.C. § 1291. Determinations regarding the ECD are subject to plenary
review. Bennun v. Rutgers State Univ., 941 F.2d 154, 163 (3d Cir. 1991).
4
v. Reynolds and Reynolds, Co., 25 A.3d 1027, 1037 (N.J. 2011) (quoting N.J. R. Civ. P.
4:5–1(b)(2)). The Moccos and FCHG IV argue that the District Court’s dismissal of their
complaint was erroneously based on Rule 4:30A of the New Jersey Rules of Civil
Procedure, which relates to claims-joinder ECD, instead of Rule 4:5-1(b)(2), which
relates to party-joinder ECD. We agree.
“Originally a claim preclusion rule, over time, the [ECD] evolved to require
joinder of parties as well, and culminated in the 1990 adoption of Rule 4:30A.” Id. at
1036 (N.J. 2011) (citations omitted). However, in response to criticism about the ECD’s
expansion, Rule 4:30A was amended in 1998 to require joinder of claims but not joinder
of parties.5 See id. In addition, Rule 4:5-1(b)(2) was adopted, which, as just mentioned,
requires a party filing a claim to tell the court of others who may be liable based on the
same alleged facts. Id. at 1037 (quoting N.J. R. Civ. P. 4:5-1(b)(2)). The notice
requirement is “a continuing obligation on litigants.” Fornarotto v. Am. Waterworks Co.,
Inc., 144 F.3d 276, 283-84 (3d Cir. 1998).
If a party violates its obligation to reveal possible additional parties under Rule
4:5-1(b)(2), a court must determine whether (1) the present action is successive to the
prior action; (2) non-compliance was “inexcusable”; and (3) the undisclosed party’s
ability to defend the successive action has been substantially prejudiced by that party “not
having been identified in the prior action.” 700 Highway 33 LLC v. Pollio, 23 A.3d 446,
5
Rule 4:30A now provides: “Non-joinder of claims required to be joined by the
entire controversy doctrine shall result in the preclusion of the omitted claims to the
extent required by the entire controversy doctrine … .” N.J. R. Civ. P. 4:30A (emphasis
added).
5
450 (N.J. Super. Ct. App. Div. 2011) (quoting N.J. R. 4:5-1(b)(2)). The failure to comply
with the notice requirement raises the potential, but not the certainty, of sanctions,
including the possibility of dismissal . N.J. R. Civ. P. 4:5-1(b)(2). Thus, even if a court
determines that party-joinder ECD applies, it must consider whether lesser sanctions than
outright dismissal would be appropriate. In contrast with cases involving a violation of
Rule 4:30A, which requires dismissal, a violation of Rule 4:5-1(b)(2) requires a
discretionary decision by the trial court, and dismissal is the exception and not the rule
when party-joinder ECD is thus at issue. See Kent Motor Cars, 25 A.3d at 1037; see also
700 Highway, 23 A.3d at 450 (“Dismissal is a sanction of last resort.”).
When this case was originally filed in state court, Frumento and Chicago Title
were not named parties in the Consolidated Cases, so party-joinder ECD, as set forth in
the notice requirement in Rule 4:5-1(b)(2), applied. 6 But the District Court did not
distinguish between claims-joinder ECD and party-joinder ECD in its memorandum
opinion. In fact, three things suggest that the court actually applied a claims-joinder
analysis instead of a party-joinder one. First, its analysis of ECD authorities was limited
to two cases that are inapposite, Archbrook Laguna, LLC v. Marsh, 997 A.2d 1035, (N.J.
Super. Ct. App. Div. 2010), and Fisher v. Yates, 637 A.2d 546 (N.J. Super. Ct. App. Div.
1994). Archbrook was a claims-joinder case; Fisher applied pre-1998 New Jersey law
6
It does not appear that claims-joinder ECD is at issue because that aspect of the
doctrine only takes effect between parties already joined in a suit. See In re Mullarkey,
536 F.3d 215, 229 (3d Cir. 2008). It is true that, at different times, Chicago Title was
named in the quiet-title aspect of the Consolidated Cases, but, while Chicago Title argues
that its status as a former party entitles it to invoke claims-joinder ECD, no party has
directed our attention to New Jersey authority establishing such a rule. We therefore
leave that question for the District Court to answer, if necessary.
6
that treated claims- and party-joinder ECD under the same mandatory-dismissal
framework. Second, the court’s opinion lacks any findings regarding whether there had
been a failure to timely identify Frumento and Chicago Title in the state court
proceeding, whether any failure was inexcusable, and whether such a failure caused
Frumento and Chicago Title substantial prejudice, 7 which are all required considerations
under Rule 4:5-1(b)(2) before a court may impose dismissal as a sanction. And third, the
court made no mention of the discretionary nature of sanctions for a violation of party-
joinder ECD, failing to consider at all whether lesser sanctions were available before
dismissing the complaint. Therefore, the District Court misapplied New Jersey Law on
the ECD. 8
III. Conclusion
For the foregoing reasons, we will vacate and remand with instructions that the
District Court apply a party-joinder ECD analysis when reviewing the sufficiency of the
Complaint.
7
Frumento and Chicago Title argue that the District Court found there was
inexcusable and prejudicial delay by the Moccos and FCHG IV in identifying them.
They are incorrect. They erroneously conflate statements of the state court in denying
joinder with those of the District Court, which merely acknowledged, without adopting,
the state court’s statements. The District Court itself made no findings along those lines.
8
We decline Frumento’s and Chicago Title’s invitation to undertake our own
analysis of their arguments for dismissal. The District Court is in the best position to
consider the competing contentions in the first instance.
7